The Fair Labor Standards Act and the Supreme Court Case

Encino Motorcars, LLC v. Navarro, 579 U.S. ___ (2016)

A recent Supreme Court case, Encino Motorcars, LLC v. Navarro, decided on June 20, 2016, attempted to resolve an interesting question surrounding the Fair Labor Standards Act. The question was whether or not the overtime provision of the Fair Labor Standards Act should apply to service advisors at auto dealerships, as opposed to car salesman, who do not qualify for overtime pay under the FLSA. This specific case gives an inside look into the fact intensive analysis that goes into each FLSA claim.

What is the Fair Labor Standards Act?

The Fair Labor Standards Act (FLSA) is a federal law that, among other things, sets a minimum wage and requires overtime pay to eligible employees. The general rule is that employers are required to pay all their employees one and a half times their normal wage for every hour that they work over forty hours a week unless the employee meets an exemption outlined under the law. Although a common myth, simply paying an employee a salary—as opposed to hourly—does not make them exempt from overtime. The employee must also perform certain job duties and must be paid a minimum amount in each paycheck to qualify as exempt (see exemptions).

If an employer fails to properly pay an employee’s overtime, the penalties can be steep. The employee is entitled to all unpaid overtime and attorneys’ fees. Further, the law allows for liquidated damages, which means the amount of unpaid overtime owed to an employee will be doubled. In cases of willful and repeated violations, there can be even more significant penalties against employers.

Case Details

In the Encino Motorcars case, five auto service advisors brought suit against their employer automobile dealership, alleging that the dealership they worked at was required by FLSA to pay them overtime wages. The case revolved around the statutory exception to paying overtime contained in §213(b)(10)(A). It reads in part, “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.” Service advisors interact with the customers and sell them various services or parts for their cars, but do not, unlike car salesman, sell the car itself. This distinction between salesman and service advisors is not fine-tuned in the law.

To further complicate the case, the Department of Labor, in 2011, issued a rule that service advisors, would not fall under the §213(b)(10)(A) exemption. This meant that service advisors, under this new rule, would be able to qualify for overtime under the FLSA. However, the Supreme Court ultimately stated that this 2011 rule by the Department of Labor should be not be given judicial deference (or in other words should not be considered final or absolute). In the end the Supreme Court did not decide this issue, but sent it back to a lower court to review.

Conclusion

There most important thing to learn from the Encino Motorcars, LLC v. Navarro case is that the FLSA overtime distinction is sometimes not so clear. In this case service advisors, although similar to car salesman, clearly held different employment positions with different functions and purposes. However, whether or not they should be exempt from the overtime provisions of the FLSA is a complex question.

Each FLSA related cases comes down to a fact specific analysis of what job an employee is performing, how the employee is being paid, and what practices are used by the employer. It would be wise to consult with a competent employment law attorney in Mesa to see if the FLSA applies to you.

The attorneys at Denton Peterson, PC can help you determine your rights and legal options related to the FLSA. Don’t hesitate to call Denton Peterson, PC about your specific employment issue. Call us today!

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